DOCKET NO. GE410260RO
STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
GERTZ PLAZA
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
------------------------------------X SJR 6829 (Deemed Denial)
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.:GE410260RO
Tatiana Copeland, DRO DOCKET NOS.:
ZGA-410015-RK
(ZEH-410077-RV),
(GA410158RO)
TENANT: LAEL SCOTT
PETITIONER
------------------------------------X
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
AND MODIFYING ADMINISTRATOR'S ORDER
On June 5, 1992 the above named petitioner-owner filed a Petition
for Administrative Review against an order issued on May 19, 1992
by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New
York concerning housing accommodations known as Apartment 2 at 136
West 11th Street, New York, New York wherein the Rent Administrator
determined that the subject building had not been substantially
rehabilitated to the extent necessary to exempt it from the Rent
Stabilization Law and Code, that the subject apartment fell under
the jurisdiction of the Rent Stabilization Code, and that the
tenant was entitled to a renewal lease.
Subsequent thereto, the petitioner-owner filed a Petition in the
Supreme Court pursuant to Article 78 of the Civil Practice Law and
Rules requesting that the "deemed denial" of its Petition for
Administrative Review be annulled. The proceeding was remitted to
the Division of Housing and Community Renewal (DHCR), and the
owner's petition is herein decided on the merits.
The issue in this appeal is whether the Rent Administrator's order
was warranted.
The Commissioner has reviewed all of the evidence in the record and
has carefully considered that portion of the record relevant to the
issue raised by the administrative appeal.
The following observations apparent from the record, particularly
from the architect's drawings and the owner's before-and-after
photographs, are set forth to provide a framework in the context of
which the parties'contentions can later be viewed. Because of some
conflicts between the drawings and the photographs, parenthetical
DOCKET NO. GE410260RO
comments are also included.
The subject building is a landmark building in an historic
district. It is of brick with interior dimensions of approximately
21 feet by 48 feet, sharing party walls with brick buildings on
either side. There are five habitable floors, plus a cellar with
boiler, meter room and storage spaces. The ground floor, which
previously had two apartments, has a floor two or three feet below
the level of the sidewalk in front and approximately level with the
yard in back. The floor above this is known as the first floor,
and is entered through the main entrance after climbing about a
dozen steps. It formerly had one apartment. The tenant's second
floor apartment, taking up the entire floor, is above this. The
third floor formerly had two apartments. The top floor formerly
had one apartment. This floor is about two-thirds the length of
the other four floors, being set back in both the front and the
rear of the building. A roof over the front and rear portions of
the third floor apartment comprises the rest of the length of the
building at this level. As part of the renovation the ground and
first floors were made into one duplex apartment, as were the third
and fourth floors. The tenant's second floor apartment was
unchanged in this respect. There was, and is, also a lengthwise
wall extending from the front to the back of the building on all
floors but the top one. This wall divides the building into areas
approximately fourteen feet and seven feet wide. The public
hallway and stairs occupy the middle section of the narrow portion.
On various floors the front and rear sections of the narrow portion
were used for vestibule, storage room, kitchen, bathrooms,
bedrooms, alcoves or closets.
As shown on the plan sheets, the renovation moved some of the walls
that extended across the narrow portion, changing the function of
some of the spaces. Internal stairs were built between the ground
and first floors to create a duplex; the same thing was done
between the third and fourth floors. The lengthwise wall had
several doorways between the wide and narrow portions on each
floor. There were approximately 16 doorways in the wall on the
four floors where it existed; the renovation left them unchanged
except for closing one opening, creating two openings, and moving
one opening about 18 inches. In at least one area (the front of
the third floor) the lengthwise wall was of lathe-and-plaster
construction. With respect to the partitions in the wide portion
of the building: On the ground floor approximately one-third of the
previously-existing partitions remained in place. On the first and
second floors there was no change in location of the partitions.
On the third floor the large majority of the partitions remained in
the same location. The fourth floor, having no lengthwise wall,
had no "wide portion," but the majority of partitions were removed;
new ones were added mostly to enclose two new bathrooms.
DOCKET NO. GE410260RO
Among other things, the General Notes on the cover sheet of the
architect's plans provided the following:
2. Any historic fabric damaged during the course
of construction shall be restored to match the
original at no cost to owner.
3. Existing woodwork, plasterwork, console
brackets...etc to be protected.
4. All existing stairs to be cleaned, inspected,
all damaged areas to be replaced or patched to
match existing areas except as noted.
5. All existing doors of original period in areas
of demolition shall be saved along with their
architraves and baseboards to be reused in
areas of new construction.
.
.
.
20. Field check exist. plaster wall and ceiling
surfaces for soundness. Replace loose or
damaged materials as req'd. Extreme caution
shall be exercised in area w/ ornamental
plasterwork.
.
.
.
22. Repair and make operable all window sash, as
required.
23. Repair and make operable all interior window
shutters as required.
24. Inspect all fireplaces and flues; make
operable those indicated on floor plans.
Repair other damaged fireplaces.
The "Room Finish Schedule" indicates that sixty percent of the
doors on the ground, first, second and third floors were to be
DOCKET NO. GE410260RO
existing. (The fourth floor got all new doors.) The owner's
"before" photographs show three partitions where lathe and plaster
were removed but where the heavy wood studs (most vertical members
being approximately three by four inches, with the sides and tops
of doorways being approximately six by four inches) remained. In
two of the three instances about 10-12 inches of wall and molding
was left intact at the top of the wall. In several instances
workmen have nailed boards to the existing joists overhead on the
fourth floor. (In a later affidavit the owner's architect
contended that more work was done on the ceilings, walls, floors
and stairs than was shown on the plansheets.) One photograph shows
the railing of the public stairs covered to protect it from damage.
The owner's "after" photographs show what in many instances appear
to be the same door and ceiling moldings present in the "before"
photographs, particularly where there are ornate wood millwork or
plaster moldings, and where there are unique doors and doorways
with curved tops. It is difficult to tell if the wood flooring was
sanded and refinished, as opposed to being replaced, although the
one-foot-square parquet pattern shown in two "before" photographs
is similar to the pattern in two other rooms in "after"
photographs. The "before" photographs show water damage in various
locations, particularly to the wooden porch. Inside the building
there were water stains, peeling paint and plaster, and one
instance of fallen (or torn out) lathe and tile in the first floor
bathroom next to the porch. The "after" photographs show two
modern kitchens and four modern bathrooms in the two duplex
apartments. The "before" photographs show several fireplaces
covered by plywood to protect them from damage during work in the
rooms, as well as one not yet covered; the ornate fireplaces are
visible in the "after" photographs.
The architect's plans list limited work to be done in the
complainant's apartment, which occupies the entire second floor.
A forced-air heat pump/air conditioning system, including about 15
feet of ductwork, was installed, plus electric baseboard heaters.
Exhaust vents were installed in the kitchen and bathroom. Other
than wiring necessary for these items, the electric wiring was to
remain as existing. The only new plumbing was a drain for air
conditioner condensate plus a new riser to the third and fourth
floors. Of the ten doors in the apartment, eight were to be as
existing and two new. The "Room Finish Schedule" indicates that,
other than carpeting in the public hall, all existing floors,
walls, ceilings and trim on the second floor were to be repaired,
rather than installed new. (The owner and tenant also apparently
split the cost of installing carpeting inside the apartment.)
In addition to the brick building, there was an eight foot deep
wooden extension, originally a three-story porch, added to the back
of the building. At the level of the ground and first floors the
porch was enclosed (although uninsulated), heated and wired for
DOCKET NO. GE410260RO
electricity, with french doors on the ground floor level, and
windows (plus a door to nowhere) at the first floor level. The
"before" photographs show considerable water damage to this porch.
The roof of the second story of the porch served as a deck for the
tenant. Her deck was unenclosed, although there was a roof over
two-thirds of it. As part of the renovation the porch was torn
down and rebuilt, again in wood, with an awning above the tenant's
deck in place of a roof. (The tenant's engineer said the porch
could have been repaired, the owner's engineer said it was too
deteriorated to repair.)
The Altered Building Application proposed to: "[r]epair exterior
masonry and cast iron; replace existing gas-fired boiler; provide
new Bathrooms and Kitchens; repartition Units; install new
decorative Stairs; provide Rear Wood-Frame Porch with new to match
existing; provide new electric heat pumps and ducts; repair
plaster; repaint; replace roofs." At the time that the roof work
began four of the seven existing units were occupied. During the
course of the work all but the complainant vacated, for reasons set
forth infra. The tenant temporarily left from about mid-May
through the end of August, 1986. (While the work in and on the
building was generally done from about mid-1985 to mid-1987, the
contract with Huff Enterprises, which did the work inside the
building and which was paid about 80% of the total cost of about
$410,000, was signed on May 9, 1986. Work apparently began on May
19, 1986; Huff Enterprises submitted its claim for the final
$70,425.00 on December 30, 1986.)
In the proceedings prior to this appeal, the owner submitted two
affidavits from her architect, Martin Rosenblum of Philadelphia.
In them he contended in substance that:
1) Prior to the renovation the building was in a
state of severe structural deterioration, and
the apartments were in deplorable condition.
2) At the time work began the complainant was the
only occupant in any of the seven then-
existing apartments. Three of them were
uninhabitable, two of them largely because the
wooden extension was in a state of collapse.
[In his later affidavit Mr. Rosenblum claimed
that two of them were uninhabitable. In an
affidavit in the appeal proceeding he
contended that four of them were
uninhabitable.] All apartments had one
degree or another of water damage. The
mechanical and electrical systems were
outmoded and needed replacement. The heating
system was inoperable in parts of the
building. The plumbing was failing, and
cracked cast iron pipes leaked sewage into the
DOCKET NO. GE410260RO
cellar. There were many water lines leaking
throughout the building. The interior
stairways were structurally deficient. The
roof was decayed and leaking. Several windows
were beyond repair.
3) The building was essentially renovated from
cellar to roof. Replacement of the roof
commenced in late 1985 and was completed in
early 1986. Restoration of the facade,
including total re-pointing, began soon
thereafter. The iron work was removed,
restored, and replaced. Work on the roof
included the installation of skylights for
the fourth floor bathrooms. Complete interior
alterations and rehabilitation mostly occurred
between late Spring, 1986 and the end of the
year. Mechanical, plumbing and electrical
systems were replaced to meet new building
codes. All units received new heating and
central air conditioning systems. Public
stairways and hallways were restored from the
ground floor through the fourth floor.
Extensive alterations were made to all floors
and all historic millwork and plaster moldings
were meticulously restored. The rear garden
was renovated. The rear building extension
was demolished and rebuilt, resulting in a new
deck and awning for the tenant. In addition
to the replacement of electrical and plumbing
systems in the subject apartment, and the
installation of heating and air conditioning
systems, a new toilet and bathroom floor were
installed. In addition, the bath tub walls
were retiled, the apartment repainted and
carpeting replaced.
4) Extensive alterations were made to the other
units, with seven small units having been made
into three large ones, with a seven-room
duplex below the subject apartment and a six-
room duplex above. Approximately $400,000.00
was expended on the substantial rehabilitation
and restoration of the landmark building. Due
to the extensiveness of the work it was
necessary for the tenant to vacate for a
period of time.
5) The tenant's architect obviously was not in
any apartment other than the subject unit. He
is incorrect in stating that there were "no
structural alterations to the building."
DOCKET NO. GE410260RO
Several apartments were combined, altering the
location of the kitchens and the bathrooms,
and new stairwell openings were made. The
public stairway from the first to second floor
was distressed, and was disassembled and
reconstructed. The public stairways and hall-
ways were rehabilitated from the ground floor
to the fourth floor. The rear extension, a
deteriorated, uninsulated, makeshift enclosed
porch not originally constructed as a
habitable space, was demolished and rebuilt,
based upon the recommendation of the owner's
structural engineer. The tenant's architect
had no basis to evaluate the extent of the
deterioration of the rear extension and the
need for its replacement. The party walls
clearly could not have been destroyed or
altered without damaging the adjoining
buildings. The landmarked building facade
could not be altered. Interior partitions
were removed and relocated where necessary to
provide serviceable units. The plumbing was
by and large replaced, except for serviceable
plumbing stacks and risers that were left
intact rather than risk damaging the historic
fabric of the building by replacing such
sections. The heating system had outlived its
useful life, and barely operated despite
repeated repairs.
6) The tenant's architect avoids a discussion of
the overall work undertaken, instead
nitpicking at the few areas that were not
completely rearranged. His assessments are
based only on the floor plans and a very
limited familiarity with the building. Even
the tenant's engineer, who seems to lack as
much experience in the analysis of older,
historic buildings as the owner's structural
engineer, found structural problems with the
rear extension,and discussed demolition.
In the prior proceedings the owner contended in substance that:
1) Caselaw takes precedence over DHCR decisions;
any additional DHCR criteria not in statutes
for exemption from rent regulation due to
substantial rehabilitation are invalid.
2) In Pape v. Doar, 160 A.D.2d 213, N.Y.S. 2d 344
(A.D. 1st Dept. 1990) in a situation almost
identical to the present one, the Appellate
DOCKET NO. GE410260RO
Division rejected a contention that a building
must be vacant at the start of work, and that
a gut demolition was required. The Court, in
saying that the exemption is to be strictly
construed, meant that the DHCR could not add
requirements not in the substantial
rehabilitation statute, Emergency Tenant
Protection Act ("ETPA") Section 5(a)5. DHCR's
requirements do not advance the purpose of
Section 5(a)5, which is "to give owners an
investment incentive to recoup rehabilitation
costs free of stabilized rents," as stated in
Pape v. Doar.
3) The N.Y.C. Civil Court in Goodman v. Ramirez,
100 Misc. 2d 881, 420 N.Y.S. 2d 185 held that
the entire building did not have to be vacant
to qualify for the exemption.
4) If one or more apartments are permitted to
remain occupied and unchanged, it is apparent
that "substantial rehabilitation" does not as
the DHCR claimed require a "gut demolition."
In fact, the DHCR has issued at least two
prior determinations holding that gutting is
not necessary. In Docket No.CB 430012-RO,
issued August 10, 1988, there had been "a
retention of some preexisting elements"
relating to the "vestibule and existing
stairways," and in Docket No. ART 4590-Q,
issued April 15, 1986, the owner had only
installed new floor and roof joists "where
necessary," but the DHCR found that there had
been a substantial rehabilitation in both
cases.
5) Even a requirement that the building be vacant
at the time of renovation was complied with,
since the tenant had to vacate from May 15,
1986 to September 1, 1986 due to the
extensiveness of the work undertaken.
In the proceedings prior to this appeal, the tenant submitted
affidavits from an architect and an engineer. Carl Stein, the
tenants's architect, stated in substance that, based on a review of
the floor plans, on many visits to the complainant's apartment and
the fourth-floor apartment prior to the commencement of work, on
visits to the complainant's apartment after completion of work, and
on his familiarity with the tenant's deck, the building's common
hallways and staircases, the facade, and ironwork facing the
street, it was apparent to him that:
DOCKET NO. GE410260RO
1) There were no structural alterations to the
party walls, the front and rear masonry walls,
or a sustaining partition. The interior
partitions throughout the building remained
largely untouched, with any changes being
minimal in nature and performed primarily to
facilitate the installation of convenience
staircases to create two duplex apartments.
2) Hardly any changes were made in the
complainant's apartment, other than repair of
water-damaged walls and ceilings, retiling of
the bathroom wall and floor, the installation
of a heating grill, replacement of functioning
bathroom fixtures with new fixtures, the
installation of a new heating system in a
space that was previously available to the
tenant as a closet, and the presence of a new
deck, with a canvas awning in place of the
previous roof, due to the owner's demolition
and rebuilding rather than repair of the rear
extension.
3) Not all the major building-wide systems were
changed. The main plumbing lines were left in
place. The plumbing work was mainly repairs,
plus minor additional work related to the
relocation of some fixtures a short distance.
The replacement of plumbing supply branch
lines, although a significant repair, is a
periodic maintenance item that does not signal
the potential end of a building's useful life.
4) None of the interior work had structural
implications. While the demolition and
rebuilding of the wood rear extension was
structural work, the costs for substantial
rehabilitation should be discounted by the
difference in price between the replacement
work which was performed and the repair work
which could have been performed. In addition,
the historic preservation work such as repair
of the iron fence and repair of the brownstone
facade did not affect the habitability of the
apartments, and the cost of such work should
be excluded from the cost of substantial
rehabilitation claimed by the owner.
5) Contrary to the statements of the owner's
architect that "in the absence of the
rehabilitation, the housing units at the
subject building would have been inevitably
DOCKET NO. GE410260RO
lost to decay and the subject building would
have continued to structurally deteriorate
until it would have eventually collapsed,"
with a simple program of repairing the damage
caused by neglect on the part of the owners,
and a program of normal building maintenance,
the building could have continued in its then
present form for many decades. This was not a
South Bronx or East Harlem tenement with
systematically rotted joists. The interior
finishes were basically sound except where
failure to repair leaks resulted in local
water damage.
6) While the owner's architect might consider the
headering off of joists to create two openings
for convenience stairways for duplex
apartments to have structural implications,
such installation of private staircases was
performed solely for the owner's purposes
rather than being necessary to preserve the
integrity or historic uniqueness of the
building; neither staircase in any way changed
the basic structural system of the building.
The disassembly and reconstruction of the
public stairway from the first to second floor
was nothing more than the repair of an
existing building component. The re-building,
rather than repair, of the rear extension was
done solely for the owner's convenience having
to do with the replanning of the lower duplex.
7) None of the partition work and fixture
relocation necessary to alter the apartment
count were to replace deteriorated partitions
that threatened the habitability of the
building, and none substantially affected the
structure of the building.
8) The bulk of the work was entirely
discretionary, resulting from the owner's
desire to convert 136 West 11th Street from a
7-unit building to a 3-unit building. While
it is undeniably true that there were areas
within the building that required repair as a
result of the failure of the owners to
properly maintain the building over a number
of years, it is equally true that the
building was fundamentally sound and that with
appropriate repairs and maintenance, it could
have continued to be occupied exactly as it
DOCKET NO. GE410260RO
had been prior to the renovation. The nature
of the work was predominantly cosmetic repair,
non-structural partition work related to the
reduction of the number of dwelling units,
repair of deterioration that resulted from the
owner's neglect, and repair or replacement of
systems that one expects to repair or replace
in the normal course of the building's life.
The fact that a number of these things
occurred at one time is the obvious result of
the fact that they had not been done in the
normal course of the building's use when they
were initially needed.
The tenant also enclosed an affidavit from an engineer, Robert S.
Hansen, who concluded that the rear extension, basically a porch
whose first two levels had been enclosed, heated and electrified,
while requiring some structural repair and extensive cosmetic
attention, was not in immediate danger of collapse, and that repair
and renovation was the most reasonable and practical solution.
In the proceedings prior to this appeal the tenant in substance
made the following contentions, in addition to contentions
repeating statements made by her architect and her engineer:
1) When the owner bought the building in
November, 1983 two of the seven apartments
were vacant, the prior owner having evicted
one tenant in 1977, and the tenants of
another apartment having left in exchange for
a waiver of past rent, with the prior owner
leaving both apartments vacant to make the
building more attractive to potential
purchasers. Another tenant died in 1984, and
the tenants of three other apartments were
paid $30,000.00, $30,000.00 and $60,000.00 to
leave in 1985 and early 1986, with the
$60,000.00 payment being made to a tenant who
did not vacate until Spring 1986, after the
work began in late 1985. Contrary to the
owner's claims, the tenants left not because
of conditions in the building but because they
chose to accept the sums offered by the owner
in exchange for their vacating.
2) The building was not vacant when the work
commenced. While the tenant was out of the
apartment for several months while work was
being done, her furniture and furnishings
remained in the apartment. She visited the
apartment nearly every day to check on them
and to pick up her mail.
DOCKET NO. GE410260RO
3) The work done in her apartment was just
necessary repairs, with no partitions being
moved. Much of the work in the building was
ordinary repairs, and another significant
portion was required for historical
preservation tax credits. $26,200.00 was paid
Synderman Gallery for restoration of the
decorative front iron railing. Approximately
$30,000 [actually $41,900.00] was paid to The
Grenadier Corporation mostly to clean and
repair the facade, replace the roof, and
repair brownstone steps damaged by the
dropping of a refrigerator. Farm and Garden
Nursery was paid [$11,516.15] for cleaning up
the back yard, planting trees, creating a
decorative garden, and making a patio
accessible only to the first floor tenant, who
contributed to the cost of the work although
the owner did not subtract that payment from
the cost. The money spent for aesthetic
historical preservation work should not count
in deciding whether the work qualifies as a
substantial rehabilitation, nor should the
five-to-one ratio between the amount allegedly
expended, including historical preservation
work, to the building's 1985/86 value matter,
since the assessed value of the building is
not commensurate with the market value.
4) No court has ruled directly on a DHCR case
overturning DHCR criteria for substantial
rehabilitation. The owner is incorrect in
stating that Pape v. Doar held that a building
did not have to be vacant, and in stating that
the court set forth a clear and concise
standard conflicting with that of the DHCR.
In fact, the Court stated that it was not
addressing the issue of whether the apartments
had to be in a substandard or deteriorated
condition. It just stated that an increased
number of units was not required, and that
excessive quality was not an automatic bar to
exemption. It stated that, in view of "the
provisions for rent increases for major
capital improvements... The exemption, as an
exception to the remedial protections of rent
stabilization and having alternative parallel
provisions by which owners may recover their
investment, is to be strictly construed" in
favor of tenants. The Civil Court in Goodman
v. Ramirez found an exemption, even though one
DOCKET NO. GE410260RO
unit was not rehabilitated, because that unit
had previously been exempt from the Rent
Stabilization Law. The DHCR, in both Docket
Nos. BA410221RO and ARL06266W, has already
taken into account the decisions in Pape v.
Doar and Goodman v. Ramirez as well as Nelson
v. Yates. The language in Fleur v. Croy that
the owner cites to say that a substantial
rehabilitation could deprive the tenant of her
rights as a rent-stabilized tenant after more
than 20 years of occupancy is merely dicta,
and in any case it was only stated that
substantial rehabilitation which reduces the
number of units "may" result in exemption.
In an order issued on May 19, 1992 the Administrator found that the
owner had failed to substantiate that the building had been
substantially rehabilitated to the extent required, within the
meaning of the Code and based on DHCR policies and interpretations,
in order to be exempt from the Rent Stabilization Law and
Regulations. The Administrator found that the subject apartment
was subject to the Rent Stabilization Law, and directed the owner
to offer the tenant a renewal lease.
In her petition and supplements, the owner makes the same factual
and legal arguments as in the earlier proceedings, and additionally
contends in substance that the recent decision in Eastern Pork
Products v. N.Y.S. DHCR, 590 N.Y.S. 2d 77 (A.D. 1st Dept. 1992)
makes it explicitly clear that exemption pursuant to ETPA Section
5(a)5 does not require 'gutting' of a building, nor that all
apartments be vacant; that Eastern Pork was a natural progression
from Pape v. Doar, which held that the term "substantial
rehabilitation" was to be given its natural intendment, and that
neither excessive quality nor a failure to increase the number of
dwelling units should be a bar to exemption; that the work
undertaken by Farm and Garden Nursery included the removal of
debris, the replacement of a rear fence and the planting of
shrubbery, all of which work is enjoyed by the tenant from her rear
balcony overlooking the garden; that the $6,177.00 federal tax
credit previously reported has, after adjustments, been reduced to
$1,977.00; and that this de minimus tax credit based on a
$400,000.00 renovation does not change the fact that the building
was, as part of a long and comprehensive project that took several
years to complete, substantially rehabilitated within the meaning
of ETPA Section 5(a)5.
DOCKET NO. GE410260RO
In affidavits, the owner's architect Martin Jay Rosenblum makes
some of the same statements as previously, and additionally states
that he closely monitored the rehabilitation of the building,
including monitoring construction and approving all applications
for payment; that he associated himself with a New York State-
licensed architect, who reviewed the plans and filed the necessary
documentation; that the owner did not neglect the building, but
rather made what repairs could be done, and then embarked upon a
comprehensive plan of rehabilitation when it became clear that
repairs would not correct the existing conditions; that four of the
seven previously existing units were uninhabitable, and the other
three had varying levels of problems; that the two studio
apartments formerly existing on the ground floor, neither of them
with a kitchen, shared one bathroom; that their electrical system
consisted of numerous extension cords; that the third floor rear
studio had a toilet in the closet of the entry hall; that the water
lead for the bathroom sink was a garden hose from the bathtub
faucet; that new gas piping for stove gas was installed throughout
the building; that the tenant's apartment was the only portion not
substantially rewired; that this occurred because the tenant would
not allow the necessary removal of flooring in her apartment, and
because the ceiling of the apartment below hers could not be
removed since it contains some of the most significant ornamental
plaster cornices in the building; that the wiring in the tenant's
apartment is sound and within its useful life; that with the
exception of the new windows and glass doors in the rear extension,
the windows were rehabilitated and fitted with new storm windows;
that the first two flights of stairs were structurally unsound and
were replaced; that the rest of the stairs were structurally sound
and were painstakingly renovated at an expense far greater than
would have been required to simply replace them; that the ground
floor ceilings were replaced with new sheetrock; that the ceilings
on the other four habitable floors were repaired with plaster
instead of replaced because of the existence of historically
significant ornamental cornices in the plaster ceilings; that the
original parquet floors on the first floor were restored to their
original luster; that new carpeting and a new bathroom tile floor
were installed on the second floor; that new sub-flooring, plus
plank flooring, tiles, or carpeting, was used on the third and
fourth floors; that on the garden floor the plaster apartment walls
were either repaired or else replaced by sheetrock; that the first
floor apartment walls were repaired; that, other than an exposed
brick wall, the walls of the complainant's apartment were repaired
and repainted; that the existing plaster apartment walls on the
third and fourth floor were largely replaced with sheetrock; that
the historically significant public hall walls were retained,
except for third floor areas of the public hallway where the
plaster walls were replaced by sheetrock; that there is no doubt,
based upon his inspection and that of a structural engineer, that
it was necessary to demolish and rebuild the rear extension,
originally constructed only as an open porch, which was in a state
DOCKET NO. GE410260RO
of structural failure; that it was the inability to close and
secure some of its doors and windows that led to plumbing freeze-
ups; that the tenant's architect by his own admission is unable to
comment on the deterioration and habitability of three of the five
habitable floors, or to know what changes were necessary to replace
the deteriorated conditions in those areas; and that the top floor
had serious problems caused by a failed roofing and drainage
system.
In her answer and supplements, the tenant makes the same assertions
as previously, and additionally asserts in substance that the
Appellate Division in Eastern Pork did not hold that the criteria
applied by the DHCR (gut demolition of an entire, vacant building)
should be disregarded in their entirety, but that the DHCR, in the
absence of an owner's meeting those criteria, had to also inquire
into the nature, extent and scope of the work performed; that the
Court in Eastern Pork urged the DHCR to construe the term
"substantial rehabilitation" in a manner consistent with public
policy; that Pape v. Doar found that such policy required that the
exemption, as an exception to the remedial provisions of rent
stabilization, should be strictly construed since there are
alternative parallel provisions in rent stabilization by which
owners can recoup their investments such as the provisions for
major capital improvements; that in Eastern Pork the Court
continued with the statement that the basic purpose of the
exemption is to increase the number of habitable family units by
encouraging owners to substantially rehabilitate substandard or
deteriorated housing stock; that the apartments were not in a
substandard or deteriorated condition when the owner began planning
the rehabilitation, but were allowed to deteriorate after becoming
vacant, with the vacancies resulting not from unihabitability but
from evictions, deaths or the payment of money to tenants to
vacate; that the DHCR has, using Pape and Eastern Pork as its
guide, drafted a proposed advisory opinion on substantial
rehabilitation, setting forth criteria none of which the owner has
met; that the owner reused existing walls, ceilings, doors,
partitions and public stairwells, which indicates that the basic
structure of the building was sound; that neither the plumbing nor
the electrical wiring nor the windows were replaced on a building-
wide basis; that virtually nothing, other than repairs, was done in
the subject apartment; that three apartments were occupied when the
"substantial rehabilitation" work began in 1985; that the tenant
remained in occupancy essentially the entire time, relocating for
a few months only at the owner's specific request and pursuant to
a court stipulation so the owner could make repairs in the subject
apartment; that the work therefore fails to qualify as a
substantial rehabilitation sufficient to exempt the entire building
from the Rent Stabilization Law; that the owner can recoup her
investment by charging "first rents" for the two duplex apartments
occupying four of the five habitable floors; that those units may
in fact be deregulated under the Rent Regulation Reform Act of
DOCKET NO. GE410260RO
1993, since they rent for $4,000.00 and $5,000.00 and since their
tenants have high incomes; that the complainant's apartment should
in any case remain regulated for the duration of her occupancy,
since the Court in Eastern Pork specially left open the question of
whether an apartment whose tenant continued in occupancy through a
substantial rehabilitation would lose its stabilized status, and
since the proposed DHCR advisory opinion provides that it would not
lose it during such tenant's occupancy; and that the equities
mandate, based both on the limited work performed in the subject
apartment as well as the history of the complainant's tenancy of
more than twenty years, that the DHCR should affirm the directive
that the owner offer the tenant a rent stabilized renewal lease.
In response, the owner contends among other things that:
1) The Administrator's order must be revoked, since
Eastern Pork makes clear that the DHCR's pre-existing
policy, requiring the gutting of a vacant building, was
illegal, unreasonable and contrary to statute, and since
such policy was the sole basis for the Administrator's
order.
2) Eastern Pork compels the DHCR to construe the term
"substantial rehabilitation" in light of its commonly
understood meaning, rather than using a narrowly
constructed "all or nothing" criterion. Eastern Pork
does not suggest that the DHCR must construe the term in
a manner consistent with the remedial purpose of the Rent
Stabilization Law, but rather states that the term must
be construed in harmony with the legislative purpose of
ETPA Section 5(a)(5), which is to increase the number of
habitable family housing accommodations. This is
requiring the DHCR to further the exemption from the Rent
Stabilization Law.
In a further submission the tenant asserts in substance that the
recent decision in 81 Russell Street Associates v. Scott, N.Y.L.J.
August 25, 1993, p.24, c.2 (Civ.Ct., Kings County) [which found
that a certain building was not exempt from the Rent Stabilization
Law by virtue of substantial rehabilitation since the owner in that
case had failed to demonstrate that the work was necessary, that
the renovation significantly contributed to the available housing
stock in the city, and that the cost of the renovation could not be
recouped within the framework of the Rent Stabilization Law]
included a comprehensive review of all judicial decisions,
including Eastern Pork, addressing the substantial rehabilitation
issue; that an application of the principles set forth in 81
Russell Street reveals that no "substantial rehabilitation" was
performed in the present case; that Eastern Pork does not mandate
a reversal of the Administrator's order; that the Appellate
DOCKET NO. GE410260RO
Division's general definition of the term "substantial
rehabilitation" is broad enough to be subject to various
interpretations; that a result reached by considering the totality
of the circumstances must be logical, equitable and consistent with
the goals of the Rent Stabilization Law as a whole; that the court
in Eastern Pork, in noting that the purpose of the exemption was to
increase the number of habitable family units, was just making that
point in connection with its holding that it was unreasonable for
the DHCR to require, as an absolute condition for the exemption,
that a building be completely vacant when the work is commenced;
that the Appellate Division clearly did not intend to contradict
its holding in Pape v. Doar that the exemption was to be strictly
construed so as to foster the remedial purposes of the Rent
Stabilization Law; that the Court, had it intended to change its
position, would have done so clearly; that the owner can recoup her
investment by rent increases for both individual apartment as well
as building-wide improvements, and most particularly by the fact
that the owner could charge initial free market rents for the two
duplex apartments created from six individual housing units; that
the owner is in fact charging very high rents for the duplex
apartments; that the owner is misplacing reliance on Goodman v.
Ramirez in claiming that unrenovated, occupied units are exempt
from rent stabilization if a substantial rehabilitation has been
performed on the remainder of the building; that Eastern Pork
expressly left open the issue and, contrary to the owner's claim,
cited Goodman for limited purposes only; that even the Goodman
court did not reach the issue since the only occupied unit was a
Class B unit previously exempt from rent regulation; and that a
finding that the tenant would remain stabilized for the duration of
her tenancy, even if the building were found to have been
substantially rehabilitated, would be consistent with the reasoning
in a long line of cases where courts have held that it would run
counter to the provisions of the Rent Stabilization Law to evict
the remaining rent stabilized tenants where the renovation of a
building has reduced the number of units to fewer than six because
an owner had unilaterally decided to alter the building for its own
financial reward.
With her submission, the tenant's attorney has enclosed an
affidavit from her architect, Carl Stein. In addition to repeating
assertions made in previous affidavits, he further asserts in
substance that the declaration by the owner's architect that the
housing units would have, absent building rehabilitation, continued
to structurally deteriorate until the building collapsed, proves
nothing, since any building denied basic repairs and maintenance
will eventually collapse, whether it takes decades or centuries;
that every building as part of normal upkeep periodically needs
reroofing, repointing, repair and replacement of pipes and plumbing
fixtures, patching of walls, floors and ceilings, etc; that the
small two-story addition at the rear of the building represents
DOCKET NO. GE410260RO
less than 6 percent of the floor area of the building; that it is
the only area in which there arguably was any structural
deterioration; that the poor condition of the extension, which was
originally constructed as an open porch and later "enclosed in a
makeshift fashion" with no foundation or fire walls, and which was
not part of the building's basic structure, is no evidence of the
condition of the remainder of the building; that the building
drawings do not, except for the rear extension, call for any
structural work to replace joists, bearing walls or structural
members; that the ability to repair rather than replace ceilings is
further evidence that neither joists nor structural members were
"in a state of structural deterioration"; that at least five of the
seven apartments were habitable, as they remained occupied (except
for a tenant who died in 1984) until the owner bought them out
(except the complainant) after she contracted for roof replacement;
that the owner's architect, while contending that "the interior
stairs were structurally deficient," also, describing in detail the
"painstaking and expensive measures" taken to repair rather than
replace the stairs between the second, third and top floors of the
building, describes the stairs as "structurally sound"; that in
fact the architect's drawings show that, other than utility stairs
to the cellar, all public stairs were to remain as existing; that
roofs have an average useful life of 10 to 20 years, so roof
replacement is not evidence that a building is "in a state of
structural deterioration"; that exterior work, such as masonry
cleaning, repointing of brickwork, painting and some local repair
of woodwork, resurfacing of brownstone, and ironwork is not
evidence of a "substantial rehabilitation," but was rather done
either for aesthetic reasons or as part of routine long-term
maintenance; that the architect's drawings indicate that much of
the plumbing was re-used, although new branch lines were used where
bathroom or kitchen fixtures were relocated; that the individual
heating units, which replaced a steam heat/radiator system of more-
than-sufficient capacity, enabled the owner to transfer heating
costs to the individual tenants; that the installation of new
electric sub-panels and meters would have been necessitated by the
decision to install electric heat in each of the units, and not
because the entire system was in violation of the code; that the
relocation and replacement of outlets and switches was similarly
necessitated by the owner's duplexing of apartments; that Mr.
Rosenblum's statement that the original wiring in the complainant's
apartment is "sound and within its useful life" conflicts with his
claim that the "entire electrical system was outmoded, and did not
comply with code"; that the condition of the windows was
sufficiently good that they could be repaired and reused, further
indicating the generally good condition of the building; that
plaster ceilings, particularly delicate moldings, are the first
area affected by structural problems and floor joist deflection;
that the relatively good condition of the ceilings in this case
rebuts any claim of a failing building; that any ceiling
replacement resulted from water infiltration from the roof or from
the duplexing work, as opposed to structural damage; that, with the
DOCKET NO. GE410260RO
exception of the rear extension, floor work consisted of routine
repairs and maintenance, with neither joist replacement nor floor
leveling being necessary; that most of the wall work was either
optional work to reconfigure the units into duplex apartments, or
repairs necessitated by water damage; that of the 36 rooms shown on
the Finish Schedule only 2 have all new walls and only 6 have some
new walls; that the new kitchens and bathrooms were required by the
owner's desire to create two duplex units from six individual
units; that, with the exception of the rear extension, all the work
is consistent either with the creation of duplex apartments or of
routine maintenance; and that minimal work was done in the
complainant's apartment other than the heating system change
necessitated by the owner's decision to remove the central heating
system and install separately billable equipment in each unit.
In a recent affidavit, the tenant repeats prior assertions, and
additionally asserts in substance that five of the seven apartments
were occupied, and thus habitable, when the owner bought the
building, and thus could not have been considered substandard or in
a seriously deteriorated condition; that the heating system was
adequate, although the heat failed on several occasions when the
pipes near the open first floor french doors froze and broke; that
the owner's architect never asked the tenant's permission to remove
her floor to install new wiring; and that the owner, by charging
approximately $95,000 more in annual rents than before the
renovations, was able to recoup her $400,000 in renovations in a
little over four years.
In a further submission, the owner contends in substance that the
Court in Eastern Pork did not give the DHCR wide discretion as to
how the term "substantial rehabilitation" was to be interpreted,
but rather held that the clarity of the term barred any
"administrative construction"; that the analysis in 81 Russell
Street is deficient in several ways; that ETPA Section 5(a)(5)
entirely exempts a substantially rehabilitated building from the
Rent Stabilization Law, notwithstanding the fact than an owner of
such a building might also be able to recoup its investment though
M.C.I. increases or initial free market rents; that ETPA Section
5(a)(5) clearly states that "[h]ousing accommodations in buildings
completed or buildings substantially rehabilitated as family units
on or after January first, nineteen hundred seventy-four" are
exempt from regulation; that Goodman stated precisely this; that
Eastern Pork made clear that a building could be substantially
rehabilitated even if some apartments remained untouched; that
Eastern Pork did not address the status of unrenovated apartments
since the sole unrenovated apartment in that case had been vacated
years before by the rent controlled tenant; that the Court in
Eastern Pork held that the DHCR could not limit the statute in ways
that the Legislature could have easily expressed, but failed to do
so; that the Legislature could have, but did not, include an
DOCKET NO. GE410260RO
exception for unrenovated apartments in a substantially
rehabilitated building; and that the court in Goodman avoided the
issue of whether a Class B apartment was subject to rent
stabilization, because it found that such apartment was located in
a building which had been substantially rehabilitated.
In recent affidavit, the owner contends among other things that the
mere fact that five of the seven apartments were occupied when she
bought the building does not mean that they were "habitable" and
not substandard or in a seriously deteriorated condition, and that
the other two units had been uninhabited for years.
In a recent affidavit the owner's architect repeats contentions
made previously, and additionally contends in substance that
approximately 30% of the garden rear studio was located in the rear
extension, as was approximately 10% of the first floor apartment,
and that the tenant considered the roof of the extension, which
comprised her deck, to be part of her habitable space, so that at
least three apartments would have been partially destroyed if the
rear extension had collapsed; that the rear extension's lack of
structural integrity jepardized the entire building; that it is not
uncommon, during the course of a rehabilitation project, to find
that elements previously believed to be sound actually are
deficient and must be replaced; that in fact the stairs between the
first floor and second floor were replaced; that the leakage
problem throughout the building was a function of the poor design
and poor drainage of the inward sloping front roof; that the main
focus of the structural deterioration was the rear extension; that
most of the water damage occurred on the upper floors, while most
of the historical, aesthetic and architecturally significant
elements were located on the lower floors; that the tenant's
architect does not bother to sift through the $400,000.00 costs to
establish how it "primarily reflects" the cost of complying with
the Landmarks Preservation Commission; that the rehabilitation of
the building was occasioned by many factors, primarily the
generally deteriorated condition of the building as well as the
outmoded layouts of several of the units; that restoration of the
brownstone trim and the decorative iron work was in part a safety
issue; that more of the plumbing had to be replaced than was
envisioned on the plansheets; that the heating system was outmoded;
that gas repiping was done because the existing piping was old and
much of it was no longer used; that the electric wiring in the
tenant's apartment, while legal for an existing apartment, would
not comply with the code for a new installation; that the electric
system in the rest of the building, being outmoded and generally
insufficient for the electrical needs of modern day living, was
replaced where possible; that the relatively intact condition of
the front windows, which had received more maintenance than areas
of the building which were not visible, is not a fair indicator of
the general condition of the building; that, although not
DOCKET NO. GE410260RO
originally called for on the plansheets, a substantial amount of
flooring was completely replaced; that more work was also done on
the walls than originally called for; and that the tenant's
complete lack of cooperation was the reason for the limited work in
her apartment.
In response, the tenant's attorney asserts among other things, that
the owner's architect did not, in his numerous submissions prior to
his September 9, 1993 affidavit, state that the work actually
performed deviated in any way, never mind significantly, from the
full-sized building plans which the DHCR
indicated that it would rely upon. In an affidavit, the tenant's
architect asserts in substance that, while the actual construction
work required for a renovation will differ from that defined by the
architectural documents, there is a great divergence between the
documents submitted to the Buildings Department and the actual work
claimed by the owner's architect to have been performed; that as a
practicing architect he would not expect to see a set of final
architectural documents to show no work at all for a particular
major aspect of the building, such as the structure, and then to
later hear that that particular aspect was in a state of immiment
building-wide failure requiring major work to prevent the loss of
the building; that, as an example, the drawings show no work to be
done on stairs above the basement; that no amendment was filed with
the Department of Buildings as would have been required if stairs
were structurally deficient and had to be replaced; that it is
clear from an examination of the stairs today that the treads were
replaced on the stairs from the first floor to the second floor,
which is not surprising since that is the most heavily traveled
flight of stairs; that it is also obvious that the structure of
those stairs - the outside and wall stringers and internal
structure - was not disturbed; that it is also clear that the
stairs above the second floor were not rebuilt in any way; that the
main structure at the subject premises is a substantial masonry
building with a foundation that extends more than a story and a
half below grade; that it is approximately seventeen times the size
of the added-on wooden extension, which was a structure without
proper foundation and which was never intended to be used as
interior space; that deterioration of the extension is no indicator
of the condition of the main structure itself; and that if systemic
structural problems existed in the main building, the owner's
architect should have seen evidence of them and noted them on the
architectural documents.
The Commissioner is of the opinion that the owner's petition should
be denied, and that the Administrator's order should be modified.
It is uncontested that the tenant herein has been in continuous
occupancy of the rent stabilized subject apartment long prior to
the commencement of the renovation work in 1985 and remained in
occupancy during the renovation period except for a brief time
DOCKET NO. GE410260RO
pursuant to court stipulation when repairs were made in the subject
apartment. It is also undisputed that no major renovation work
took place in the subject apartment. Therefore the question is
presented as to whether, even if it is considered that the rest of
the subject premises underwent a substantial rehabilitation, an
occupied rent stabilized apartment would lose its rent-stabilized
status under the statutory exemption. It is noted that the Court
in Eastern Pork specifically chose not to address this issue.
Further the court in Goodman v. Ramirez dealt with an occupied
Class B apartment which was not subject to rent stabilization prior
to the renovation work so that the Goodman court also did not deal
with this particular issue. Also, Goodman was not an appellate
case. In Pape the Appellate Division cited Goodman only on the
issue of rehabilitation as "family units." In Eastern Pork the
Appellate Division cited Goodman only on the issue of the vacancy
requirement, and stated that it was not deciding the issue of the
continued stabilized status of occupied apartments. Based on the
equities involved - the fact that the complainant is a long term
rent stabilized tenant in an apartment with very little renovation
work done therein - the Commissioner is of the opinion that, even
if the rest of the building were found to have been substantially
rehabilitated, the subject apartment would continue to retain its
rent stabilized status at least while the tenant herein maintains
her occupancy in such apartment. In this connection, the
Commissioner also finds persuasive the analogy to the line of cases
cited by the tenant which hold that, based on the underlying
purpose of the rent laws, apartments continue to be considered rent
stabilized although the buildings where they exist have been
restructured to contain fewer than six housing units, even though
a building with fewer than six units is normally exempt from the
Rent Stabilization Law - Shubert v. DHCR, 162 A.D.2d 261, 556
N.Y.S. 2d 618 (1st Dept. 1990), et. al. In Shubert, the owner had
combined apartments thereby reducing the number of residential
units from seven to five subsequent to the base date for rent
stabilization purposes. The Shubert court found that such
unilateral action on the owner's part could not effect an exemption
from the Rent Stabilization Law even as to future tenancies
commencing after the reduction in residential units.
Because this order is finding that the Administrator was correct in
determining that the complainant was entitled to a stabilized
renewal lease, the Commissioner does not consider it necessary to
reach the issue of whether or not the building was substantially
rehabilitated so as to exempt it from rent stabilization coverage.
THEREFORE, in accordance with the Rent Stabilization Law and Code,
DOCKET NO. GE410260RO
it is
ORDERED, that this petition be, and the same hereby is, denied and
that the Rent Administrator's order be, and the same hereby is,
modified to state only that the tenant is entitled to a rent
stabilized renewal lease. No finding is made as to whether the
subject building was substantially rehabilitated and thus exempt
from Rent Stabilization.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner